Early in his book Fifty Billion Dollars, Jesse Jones described his experiences dealing with bankers while running the Reconstruction Finance Corporation (RFC) in the last period of the Hoover Administration, late 1932 and early 1933. During the waves of failures of small and medium-sized banks in that period, Jones and his examiners were surprised to find that some of the big banks – notably Republic Bank in Detroit, Continental Illinois in Chicago, and particularly National City in New York — were filling up with great volumes of excess deposits they seemed unable to lend. Jones did not dilate on why this was the case. But he made it clear that quite a few banks, anticipating that their own failure could be around the corner, intended to turn those deposits into new capital stock when the failure came. In other words, they intended to — and some did — “bail in” their depositors to try to save their bank. Sometimes this was done with the consent of the largest depositors, according to Jones – the smaller depositors weren’t consulted.
This may go to explain the nearly incredible degree of inability or unwillingness of today’s megabanks to lend out their swelling deposit base, which has now persisted for more than a year under the unprecedented flood of quantitative easing money-printing by the biggest central banks which began in March 2020. As of the reporting week ending Oct. 13, the excess of deposits over loans in the entire banking system had reached 75% — $17.6 trillion in deposits against $10.1 trillion in loans outstanding, according to the Federal Reserve’s weekly accounting form H8.
The growing mass of securities brokerage loans and related speculations which – along with loans — go into what is called “bank credit,” total $6 trillion out of the $17.6 trillion. That means that securities dealing has reached 36% of “bank credit” assets for the entire banking system, demanding Glass-Steagall reorganization of the megabanks. If this ratio obtains for all 5,000 banks combined, it is 50% of assets in securities speculation for the biggest Wall Street banks. Glass-Steagall re-enactment is urgent!
